MSU3506 UNIT 01

Introduction to the Unit I

This unit I consists of what accounting is and why study accounting. It defines
accounting and describes the function of accounting and the nature and purpose of the
information it provides. Further, users of accounting and their information requirements
will be discussed. We should study this unit I, specially to comprehend accounting
concepts and principles. Basics of components of accounts describes five types of
accounts, they are assets, liabilities, capital, Income and expenses. The unit I will help
you to understand the accounting equation. Briefly it discusses how to draw source
documents via transactions and record them in primary books like main journal, sales
journal and purchase journal. Then unit I discuss how to draw up ledger accounts, control
accounts and prepare the trial balance. Finally the unit I introduces basic financial
statements like trading and income statement and statement of financial position of a sole
proprietorship. Apart from the merchandise business, the unit I discuss the manufacturing
accounts and statement of cash flow of a sole proprietorship also.

Learning above will enable to manage a sole proprietorship business better as learner will
understand the basic accounting process. Even, a learner who follows this course first
time will be able to grasp the subject well and activities will support to improve the skills
of accounting. Accounting is the language of business; if a person does not know how to
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read financial statements he is incapacitate to get better decisions. Therefore having
sound accounting knowledge is prerequisite to manage business organization optimal
way. This course will put a concrete foundation to the subject of financial accounting.

Organization of the Printed Material

This unit 1 is presented to you in ten sessions
Session 1 01-11
OU

Accounting and its Purpose

Session 2 12-32
Basic of Accounting
Session 3 33-40
Double Entry System
Session 4 41-61
Book Keeping and Accounting
Session 5 62-73
Financial Statement Formats
Session 6 74-82
Manufacturing Accounts
Session 7 83-94
Accounting for Sole Proprietorship
Session 8 95-110
Accounting for Adjustments
Session 9 111-118
Accounting Errors and Suspense Account
Session 10 119-128
Bank Reconciliation
Learning Outcomes 129-131
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Copyright © (2019), The Open University of Sri Lanka
MSU3506 UNIT 01

Aims and Objectives

In this unit you will learn about
 Functions of financial accounting which makes the subject essential for business
as a functional area and how accounting subject integrate with other core areas of
a business.
 What is the significance of the accounting subject how it differ from other
functional areas like marketing, human resource management etc.
 How accounting function is governed by , and the role of accounting standards
and their impact of preparation and presentation of financial statement in business
organizations.

Activities
Attempting to do the activities and answering review questions will help
you to assess your comprehension of what you read in the text and to
check whether you have achieved the objectives given at the end of each
study sessions. Answering the model and past paper questions and getting
them self-evaluated will help you to familiarize with the types of
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evaluations and also to improve your skills in synthesis and writing.

Online activities are available to the students to make the subject more
interactive and interesting. You will be guided how to log in to the
Learning Management System (LMS) at the days school.

Study Hours
OU
This unit will require approximately 100 hours of study out of 250 total hours
allocated to the MSU3506 course of study.

Day Schools
Four hours of one day school is scheduled to be held for this unit.

Evaluation
The take home assignment and continuous assessment test (CAT) will be based on
this unit. The time table you receive at the time of registration will indicate the date
and time of the test based on this unit.

Acknowledgements
Grateful acknowledgements are made to the following sources of information.

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Copyright © (2019), The Open University of Sri Lanka
MSU3506 UNIT 01

UNIT 1
INTRODUCTION TO FINANCIAL
ACCOUNTING

Introduction
Session 1 01-15
Accounting and its Purpose

Session 2 16-32
Basic of Accounting

Session 3 33-41
Double Entry System

Session 4 SL 42-60
Book Keeping and Accounting

Session 5 61-73
Financial Statement Formats

Session 6 74-82
Manufacturing Accounts
OU
Session 7 83-94
Accounting for Sole Proprietorship

Session 8 95-110
Accounting for Adjustments

Session 9 111-118
Accounting Errors and Suspense Account

Session 10 119-128
Bank Reconciliation

Learning Outcome 129-131

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Copyright © (2019), The Open University of Sri Lanka